Abstract
The effect of financial development measured by banks, bonds, and stocks on carbon dioxide emissions (CO2E) has been widely studied while not much is known about the effect of the insurance sector development on CO2E. Thus, this study fills this void by estimating the effect of insurance consumption on CO2E for BRICS (Brazil, Russia, India, China, and South Africa) from 2000 to 2016 using the instrumental variable generalized method of moments model. The findings indicate that, generally, insurance sector development spurs CO2E in BRICS. Specifically, a 10% rise in life insurance development increases BRICS CO2E by 1%. Also, a 10% rise in non-life insurance development increases BRICS CO2E by 4%. Finally, a 10% rise in the composite insurance development index increases BRICS CO2E by 2%. The study further finds that population size, trade openness, and energy consumption drive CO2E in BRICS, while economic growth mitigates CO2E. These results were robust to alternative econometric estimators, and alternative CO2E proxy. Policies that promote green insurance consumption are recommended.
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Data availability
The data used in this study are openly available in World Bank (2019a), World Development Indicators Database at https://databank.worldbank.org/source/world-development-indicators and World Bank (2019b), and Global Financial Development Database at https://databank.worldbank.org/source/global-financial-development.
Notes
Broad money supply, domestic credit to the private sector, domestic credit to the private sector by banks, domestic credit provided by the financial sector, liquid liabilities to GDP, deposit money bank assets to GDP, deposit money bank assets to deposit money bank assets and central bank assets, stock market capitalization to GDP, stock market turnover ratio of domestic shares, number of listed companies, financial liberalization, foreign direct investment, financial openness and capital account convertibility, and bonds are most of the proxies used as financial development in the empirical literature.
CO2E from solid fuel consumption (hereafter, lnco2sfpc) refers to emissions from coal energy use.
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Appendix
Appendix Table 6 presents the panel ARDL estimates. Models 1–3 present the results when carbon dioxide emissions per capita (lnCO2E) was used as the dependent variable, while Models 4–6 present the results when carbon dioxide emissions from solid fuel consumption (lnco2sfpc) is used as the dependent variable. Standard errors are in parentheses. *p < 0.1, **p < 0.05, ***p < 0.01. ARDL (1, 1, 1, 1, 1, 1) based on the AIC was used
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Appiah-Otoo, I., Acheampong, A.O. Does insurance sector development improve environmental quality? Evidence from BRICS. Environ Sci Pollut Res 28, 29432–29444 (2021). https://doi.org/10.1007/s11356-021-12760-w
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DOI: https://doi.org/10.1007/s11356-021-12760-w